By Dr. Gastón Cedillo
HOW IMPORTANT IS THE LOGISTICS VALUE PROVIDED BY TRANSPORTATION INFRASTRUCTURE TO SUPPLY CHAINS IN TIMES WHEN RELIANCE AND RESILIENCE ARE CRITICAL?
The increasingly frequent disruptions caused by events such as natural disasters, conventional or trade wars, piracy, and pandemics, among others, are now on the minds of decisionmakers at all levels.
For these reasons, guaranteeing the accuracy and reliability of logistics, i.e. expected travel times, reduction of the carbon footprint, and cost savings provided by a welldesigned, constructed, and operated transportation infrastructure, are so critical today. The question becomes: How can the logistics value of an operating transportation infrastructure be assessed when considering new investments? Our recent research provided interesting insights and turnkey solutions.
Nearshoring and Transportation Infrastructure: A “Control Tower” Approach Is Needed
Supply chains’ regionalization, also known as “nearshoring” or “allyshoring,” is viewed as a new stage of globalization. In this context, the G-7, which is comprised of leaders of the world’s largest developed economies (France, Germany, Italy, Japan, United States, United Kingdom, and Canada), has pledged to invest $600 billion into infrastructure for developing countries.
The U.S. will provide $200 billion to counter China’s global infrastructure plan. In this context, during a July 2022 White House meeting between U.S. President Joe Biden and his Mexican counterpart, President Andrés Manuel López Obrador, the leaders discussed ways to expand legal migration, improve security, and strengthen their shared border.
During the meeting, Mexico agreed to invest $1.5 billion in border infrastructure to reinforce fluidity of North American supply chains. The key role of the transportation
infrastructure—to increase logistics value and fluidity of supply chains—is clearly acknowledged. In fact, inadequate transportation infrastructure is often mentioned as the most important challenge for companies located in emerging countries, preventing them from successfully participating in global supply chains.
Many comparative indicators that measure a country’s competitiveness consider transportation infrastructure a key element; nonetheless, most governments seem to focus more on infrastructure density (miles of roads per miles2 of territory) than to the real benefits transportation infrastructure may bring the supply chain’s operation.
Since modern industrial systems have developed advanced supply systems going from just-in-time (JIT) to justin-sequence deliveries, the increase in product variety and the multiple interfaces needed to deliver products, have exposed them to disruptions.
Thus, supply chain resilience is a critical element of industrial competitiveness today. Better supply chains enable low inventory practices that save businesses and customers valued resources. In this sense, our most recent research results proved that when looking for “regionalized” production systems, having information related to the logistics value (reliability of travel times and costs) provided by transportation infrastructure enables companies to improve the performance and resilience of supply chains. However, a “control tower” perspective is needed to achieve freight fluidity along transportation corridors. In this sense, we proposed a new logistics dashboard that enables users to analyze, understand, and remedy overly-congested transportation infrastructures.
Transportation Infrastructure: A Supply Chain Resilience Enabler
From a transportation infrastructure approach, we found that neither public nor private sectors consider collaboration over supply chains between the industrial and the territorial systems to be an important factor when building sustainability, economic competitiveness, and resilience, but the two perspectives collide.
From a private sector perspective, the need to be competitive by managing a wide range of products for which time and delivery costs must be reduced, leads companies to focus on understanding and simplifying this complexity by concentrating their efforts on a reduced number of members of their own supply chains.
From the public sector perspective, the jurisdictional restrictions of state and national borders make engineers and planners from various agencies focus on the average condition of the transportation infrastructure, putting aside the “door-to-door” delivery viewpoint, basic to the supply chain paradigm.
Furthermore, since every supply chain is organized around the needs of the final customer for a specific product, the logistics value, i.e. reliability of travel times, costs, carbon footprint, resilience, etc., required for an individual supply chain in a specific transportation infrastructure, is different. Therefore, a supplychain-by supply-chain analysis is also needed.
In my personal opinion, the strength and reliability of the lowest logistics value provided by a specific transportation infrastructure is the one that determines the limits of the logistics value of the whole group of door-to-door transportation infrastructures for a particular supply chain.
Logistics Value of Transportation Infrastructure
In the current context of regionalization, the promotion of an integrated vision of the logistics value is important. For example, different public and private entities operate along the USMCA1 freight transportation corridors to improve supply chains’ fluidity; but in practice, there is a lack of coordination. As an illustration, one of the critical success factors for the USMCA region would be to increase cross-border throughput,
understood as the reliability of the time, volume, carbon footprint, and costs by which products move through manufacturing processes, transportation, and customs, at the border. Specifically, from our perspective, at least two actions are needed.
First, both the private sector’s decision-makers and public authorities require a standardized measurement approach to effectively and jointly measure the logistics value provided by transportation infrastructures along a specific freight transportation corridor to coordinate public-private actions. For this, an informatics dashboard is needed.
A data hub that monitors the logistics value provided by different infrastructures becomes strategic when considering investments as well as the operation of transportation and logistics infrastructures.
For those decision-makers in the private sector, it could provide beneficial information about the realistic contribution of infrastructures to the logistics value of their supply chains when they decide to use one transportation infrastructure instead of another.
For decision-makers in the public sector, a data hub could deliver precise information about where the transportation network needs to be improved—where repairs are needed, how and where to increase capacity, and other facets of the infrastructure—to maintain reliability in travel times, costs, carbon footprint and disruption risks, etc., assurances that were made to users and the best use of public resources.
1 The 2018 U.S.-Mexico-Canada Trade Agreement.
Second, since numerous public and private entities operate along the same transportation corridors, a single contact—a freight transportation corridor manager—would serve as a “control tower” for every key USMCA corridor. This position is crucial as it would serve as the designated point person for solving coordination issues.
Since reliability, flexibility, reduction of the carbon footprint and cost reductions are requirements for modern logistics systems, nearshoring is a great option for the USMCA region when looking to increase supply chain resilience. This could result not only in a world-class transportation and logistics system for the three nations, but could generate a new regional pride based on products “Made in North America.”
About
Dr. Gastón Cedillo-Campos is a logistics system dynamics specialist. For over 15 years, he has been an academic researcher and consultant for public agencies and multinational companies.
He received a doctorate in transportation and logistics systems from the University of Paris in 2004. He is member of the Texas Center for Border Economic and Enterprise Development of the Texas A&M International University, and founder of the National Laboratory for Transportation Systems and Logistics of the Mexican Institute of Transportation (IMT) as well as the Mexican Logistics and Supply Chain Association.
Cedillo-Campos is the scientific chairman of the International Congress on Logistics and Supply Chain (CiLOG). Among the many awards and recognitions he has received are Mexico’s National Logistics Award, the Technology Innovation Award from the Autonomous University of Nuevo Leon, and the Engineering Leadership Award from the University of Anahuac.
Dr. Cedillo-Campos designed several real-life projects as the LogistiX-Lab, the First Urban Logistics Living Lab in Latin America, a real-life laboratory for measuring logistics practices, transportation emissions, and energy in “Last-Mile” deliveries; eraclituX, an interactive digital map which uses millions of GPS data for measuring the reliability of travel times of freight transportation corridors in Mexico; and IMT-X, an autonomous unmanned aerial vehicle for logistics purposes.
